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Item 7. Management’s Discussion and Analysis

2024-03-22 compared with 2023-03-16 · 122 added, 139 removed, 161 unchanged (62% of the section changed)

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The following discussion should be read in conjunction with the information contained in the consolidated financial statements and notes thereto included in Item 8, "Financial Statements and Supplementary Data." Our financial condition and results of operations are not necessarily indicative of what may be expected in future years.

Effects of COVID-19

As of December 31, 2022, the effects of COVID-19 have not had a material adverse effect on Solitario’s administrative activities as we have three full-time employees, all of whom can work remotely, and are not required to meet in person on a regular basis.

We use part-time employees and contract geologists at our Golden Crest project in South Dakota and to date, the effects of COVID-19 have not had a material impact on our operations at the Golden Crest project.

However, as a result of the pandemic our joint-venture partners, Teck at our Lik project and Nexa at our Florida Canyon project, reduced, with our concurrence, the planned exploration activities on these projects for 2021 and during 2022 implemented safety and operational protocols for COVID-19 and are reviewing their 2023 exploration plans on our projects to comply with these protocols.

These protocols include, but are not limited, to;

(i) our partners’ limited exploration staffing;

(ii) certain safety and operational guidelines for COVID-19 and other potential pandemics related to their exploration activities;

(iii) the reallocation of exploration resources to non-site specific tasks, such as data and resource review, and planning for future drilling;

and (iv) the ability to modify and or postpone 2023 exploration activities if necessary.

Solitario has discussed these operational and safety measures with our joint venture partners and currently does not believe these measures are expected to have a major impact on planned 2023 exploration activities and does not believe these measures negatively reflect on the long-term economic potential of either its Lik or Florida Canyon projects.

The extent to which the COVID-19 pandemic impacts our business, including our exploration and other activities and the market for our securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time.

Please see Item 1A, “Risk Factors,” in this Annual Report on Form 10-K for the year ended December 31, 2022.

Solitario believes its current cash and short-term assets together with potential access to capital under its ATM Program (defined below) or otherwise, provide Solitario with the flexibility to continue its short and mid-term operations.

Business Overview and Summary

We are an exploration stage company as defined by rules issued by the SEC.

We were incorporated in the state of Colorado on November 15, 1984 as a wholly owned subsidiary of Crown.

We were incorporated in the state of Colorado on November 15, 1984.

In July 1994, we became a publicly traded company on the TSX through our initial public offering.

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We are conducting independent exploration activities in Peru and through joint ventures operated by our partners in Peru and the United States.

We conduct potential acquisition evaluations in other countries of both North and South America.

We conduct potential acquisition evaluations in other countries in both North and South America.

As of December 31, 2023, we have balances of cash and short-term investments that we anticipate using, in part, to fund planned 2024 exploration, to further the exploration of our Lik and Golden Crest projects, conduct reconnaissance exploration and to potentially acquire additional mineral properties.

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The potential sale, joint venture or development of our mineral properties will occur, if at all, on an infrequent basis.

Historically, we have recorded revenues and met our need for capital in the past through (i) the issuance of common stock, (ii) the sale of properties and assets;

(iii) a royalty sale on our former Mt.

Hamilton property;

(iv) the sale of shares of marketable equity securities we hold;

(v) long-term debt secured by our mineral properties;

(vi) short-term borrowing;

and (vii) joint venture payments, including delay rental payments.

During 2022 we issued a total of 2,650,724 shares of common stock pursuant to our ATM Program for net proceeds of $2,023,000.

Historically, we have recorded revenues and met our need for capital in the past through (i) the sale of our investments in, and interest on, money market accounts and our short-term treasury notes and bank certificates of deposit (“CDs”);

(ii) issuances of common stock;

(iii) sales of our shares of our held marketable equity securities;

(iv) sales of covered call options on common stock of Kinross we hold;

(v) sale of mineral property interests and assets;

(vi) long-term debt secured by our mineral properties;

(vii) short-term borrowing;

and (viii) joint venture payments, including delay rental payments.

During 2023 we issued a total of 13,298,485 shares of our common stock in private transactions for net proceeds of $7,352,000.

During 2022 we issued a total of 2,650,724 shares of our common stock pursuant to our ATM Program for net proceeds of $2,023,000.

We did not record any mineral property income from the sale of mineral properties during 2023 or 2022.

Proceeds from the sale or joint venture of properties, although potentially significant when they occur, have not been a consistent annual source of cash and would occur in the future, if at all, on an infrequent basis.

We have reduced our exposure to the costs of our exploration activities in the past through the use of joint ventures.

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We had a net loss of $3,754,000 or $0.05 per basic and diluted share for the year ended December 31, 2023 compared to a net loss of $3,928,000 or $0.06 per basic and diluted share for the year ended December 31, 2022.

As explained in more detail below, the primary reasons for the increase in net loss during 2022 compared to 2021 was (i) an increase in exploration expense to $2,283,000 during 2022 compared to exploration expense of $1,198,000 during 2021;

(ii) an increase in general and administrative expense to $1,360,000 during 2022 compared to general and administrative expense of $952,000 during 2021;

and (iii) the recording of an unrealized loss on marketable equity securities during 2022 of $94,000 compared to an unrealized gain on marketable equity securities of $82,000 during 2021.

Partially offsetting these factors that contributed to the increase in our net loss in 2022 were the following (i) a decrease in the loss on sale of marketable equity securities to $201,000 during 2022 compared to a loss on the sale of marketable equity securities of $248,000 during 2021;

(ii) an increase in interest and dividend income to $131,000 during 2022 compared to interest and dividend income of $123,000 during 2021;

(iii) an increase in other income to $20,000 during 2022 compared to other income of $10,000 during 2021;

and (iv) a decrease in the loss on derivative instruments to $4,000 during 2022 compared to a loss on derivative instruments of $38,000 during 2021.

As explained in more detail below, the primary reasons for the decrease in net loss during 2023 compared to 2022 was (i) an increase in interest income to $191,000 during 2023 compared to interest income of $131,000 during 2022;

(ii) a recorded gain on derivative instruments of $31,000 during 2023 compared to a loss on derivative instruments of $4,000 during 2022;

(iii) a loss on sale of marketable equity securities of $201,000 during 2022, compared with no sales of marketable equity securities during 2023;

(iv) an unrealized gain on short-term investments of $56,000 during 2023 compared to an unrealized loss on short-term investments of $108,000 during 2022;

and (v) an unrealized gain of $83,000 on marketable equity securities during 2023 compared to an unrealized loss on marketable equity securities of $94,000 during 2022.

Partially offsetting these factors that contributed to the decrease in our net loss in 2023 were the following (i) an increase in our exploration expense to $2,378,000 during 2023 compared to exploration expense of $2,283,000 during 2022 and (ii) an increase in general and administrative expense to $1,712,000 during 2023 compared to general and administrative expense of $1,360,000 during 2022.

Each of these items is discussed in greater detail below.

Our primary exploration activities during 2022 were related to our Golden Crest project in South Dakota and our Lik project in Alaska.

Our primary exploration activities during 2023 and 2022 were related to our Golden Crest project in South Dakota and our Lik project in Alaska.

We recorded $1,798,000 of exploration costs at Golden Crest during 2023 compared to $1,505,000 during 2022.

The Golden Crest expenditures during 2023 and 2022 consisted primarily of geologic evaluation of claims for staking, mapping and soil and rock sampling with related assay costs.

In addition to these exploration costs, we also capitalized $340,000 and 695,000 of mineral acquisition costs at Golden Crest for our initial acquisition costs related to leasing, staking and filings on claims acquired during 2022 and 2021, respectively.

In addition to these exploration costs, we also capitalized $340,000 of mineral acquisition costs at Golden Crest for our initial acquisition costs related to leasing, staking and filings on claims acquired during 2022 compared to 2023 when we had no staking, leasing or other initial acquisition costs and, accordingly we did not capitalize any initial acquisition costs during 2023.

All future exploration and filing costs related to these claims will be expensed as incurred.

Solitario’s share of exploration expenses at our Lik project in Alaska was $668,000 during 2022 compared to $362,000 of exploration expense at the Lik project 2021.

Teck completed a three-hole drilling program during 2022 which accounted for the increase in expenses during 2022 compared to 2021.

This was the first drilling program conducted since 2011.

Drill hole Lik-231 intersected 3.5 meters (11.5 feet) grading 9% zinc and 3% lead.

Holes Lik-230 and 232 did not intersect significant mineralization.

In addition, Teck performed on-going geologic evaluation of the Lik project during both 2022 and 2021, which included on-site geophysics, mapping and analysis of prior drilling and permitting as part of a 50/50 exploration program managed by Teck.

The geophysical survey was successful in defining a low-amplitude gravity anomaly that requires further follow-up work.

We are evaluating, along with Teck, the completed 2022 drilling program for planned exploration including potential drilling in 2023.

The decision to drill at Lik during 2023 is expected to be made prior to the end of the second quarter of 2023.

Given that the exploration program at our Florida Canyon project in Peru is fully funded by our joint venture partner, Nexa, we had relatively small exploration expenses at Florida Canyon of $16,000 during 2022 compared to $85,000 in 2021.

During 2021 we made the decision to abandon our Gold Coin project in Arizona after initial exploration efforts did not provide sufficient encouragement to move the project forward.

The remaining exploration expenditures during 2022 and 2021 were reconnaissance work, including the evaluation of potential mineral properties for acquisition, including work during 2021 at Golden Crest, prior to its acquisition.

Our 2023 total exploration and development budget, excluding any new projects, in which we may acquire an interest, is approximately $2,000,000, which reflects planned work at the Golden Crest project as well as the Lik project.

Our planned exploration activities in 2023 may be modified, as necessary for any drilling programs we may undertake at Golden Crest or projects we may acquire, changes related to any number of factors including COVID-19 adjustments and delays, potential acquisition of new properties, joint venture funding, commodity prices and changes in the deployment of our capital.

Solitario’s share of exploration expenses at our Lik project in Alaska was $404,000 during 2023 compared to exploration costs at our Lik project of $668,000 during 2022.

Teck completed a single drill hole during 2022 compared to a three-hole drilling program during 2022 which accounted for the decrease in expenses during 2023 compared to 2022.

In addition, Teck performed on-going geologic evaluation of the Lik project during both 2023 and 2022, which included on-site geophysics, mapping and analysis of prior drilling and permitting, as well as on-going site environmental monitoring, evaluation and clean-up as part of a 50/50 exploration program managed by Teck.

The geophysical surveys were successful in defining a low-amplitude gravity anomaly that requires further follow-up work.

We are evaluating, along with Teck, the completed 2023 and 2022 drilling programs for planned exploration in 2024.

Given that the exploration program at our Florida Canyon project in Peru is fully funded by our joint venture partner, Nexa, we incurred relatively small exploration expenses at Florida Canyon of $41,000 during 2023 compared to $16,000 in 2022.

The remaining exploration expenditures during 2023 and 2022 were reconnaissance work, including the evaluation of potential mineral properties for acquisition.

Our planned 2024 total exploration and development budget, excluding any new projects, in which we may acquire an interest, is approximately $3,927,000, which reflects planned work at the Golden Crest project, including $2,000,000 for drilling the Golden Crest project, depending on permitting.

Our planned exploration activities in 2024 may be modified, as necessary for any drilling programs we may undertake at Golden Crest or projects we may acquire, changes related to any number of factors including, potential acquisition of new properties, joint venture funding, commodity prices and changes in the deployment of our capital.

Exploration expense (in thousands) by property consisted of the following:

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Excluding these costs, general and administrative costs were $1,465,000 during 2023 compared to $1,022,000 during 2022.

The major components of our general and administrative costs were (i) salary and benefits expense which increased to $411,000 during 2022 compared to $301,000 during 2021;(ii) legal and accounting costs which increased to $287,000 during 2022 compared to $199,000 during 2021 primarily due to increased exploration activity, as well as initial costs to comply with initial SK-1300 disclosure requirements during 2022;

(iii) travel and investor relation costs which decreased to $205,000 during 2022 compared to $234,000 during 2021 as a result of less travel and fewer investor conferences attended during 2022 compared to 2021, despite some increased investor relations costs related to the Golden Crest project during 2022;

The major components of our general and administrative costs were (i) salary and benefits expense which increased to $795,000 during 2023 compared to $411,000 during 2022, as a result of increased salaries and an increase in bonuses to $382,000 in 2023 compared to a bonus of $57,000 during 2022;

(ii) legal and accounting costs which decreased to $253,000 during 2023 compared to $287,000 during 2022 primarily due to increased accounting costs in 2022 to comply with initial SK-1300 disclosure requirements during 2022;

(iii) travel and investor relation costs which increased to $287,000 during 2023 compared to $205,000 during 2022 as a result of additional travel and investor conferences attended during 2023 compared to 2022;

and (iv) other costs related to office, insurance and miscellaneous costs which increased to $130,000 during 2023 compared to $119,000 during 2022 as a result of additional activity and general cost increases.

We anticipate general and administrative costs for 2023 to be $1,085,000 which will be somewhat higher than the costs incurred during 2022;

however, this amount may vary significantly during 2023 depending on the outcome of our exploration activity at Golden Crest and Lik and any strategic transactions we may attempt to execute upon.

We anticipate general and administrative costs for 2024 to be approximately $1,331,000 which will be somewhat lower than the costs incurred during 2023;

however, this amount may vary significantly during 2024 depending on the outcome of our exploration activity at Golden Crest and Lik projects and any strategic transactions we may attempt to execute upon.

We account for our employee stock options under the provisions of Accounting Standards Codification No.

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We recognize stock option compensation expense on the date of grant for 25% of the grant date fair value, and subsequently, based upon a straight-line amortization of the grant date fair value of each of our outstanding options.

During the year ended December 31, 2022, we recorded $338,000 of non-cash stock option expense for the amortization of our outstanding options grant date fair value with a credit to additional paid-in-capital compared to $124,000 of non-cash stock option compensation expense during 2021.

The amount was higher during 2022 primarily due the grant of 2,360,000 options with a total grant date fair value of $876,000, of which Solitario recognized 25% on the grant date or $218,000 compared to expense of $23,000 for the amortization of 25% of the grant date fair value of the 140,000 new options granted during 2021.

During the year ended December 31, 2023, we recorded $247,000 of non-cash stock-based compensation expense for the amortization of our outstanding options grant date fair value with a credit to additional paid-in-capital compared to $338,000 of non-cash stock option compensation expense during 2022.

The amount was higher during 2022 primarily due to the grant of 2,360,000 options with a total grant date fair value of $876,000, of which Solitario recognized 25% on the grant date or $218,000 compared 50,000options granted during 2023, with a grant date fair value of $16,000 of which Solitario recognized 25% or $4,000 during 2023.

The remaining compensation expense was related to the straight-line amortization of our outstanding options in 2023 and 2022.

See Note 10, “Employee Stock Compensation Plans,” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data to this Annual Report on Form 10-K” for an analysis of the changes in the fair value of our outstanding stock options and the components that are used to determine the fair value.

We recorded an unrealized loss on marketable equity securities of $94,000 during 2022 compared to a gain on marketable equity securities of $82,000 during 2021.

The net loss on marketable equity securities during 2022 was primarily related to a $172,000 unrealized loss related to a decrease in the value of our holdings of Kinross common stock and a decrease of $59,000 in the value of our holdings of Vox common stock, which was partially offset by an unrealized gain related to the increase of $137,000 in the value of our holdings of Vendetta stock.

The net gain during 2021 was primarily related to an unrealized gain on marketable equity securities of $193,000 due to an increase in the value of our holdings of shares of Vendetta common stock, and an unrealized gain on marketable equity securities of $53,000 on our holdings of Vox common stock offset by an unrealized loss on marketable equity securities of $153,000 in the value of our holdings of Kinross common stock and an unrealized loss on the value of our holdings of TNR Gold Corp.

(“TNR”) of $11,000 during 2021.

We recorded an unrealized gain on marketable equity securities of $83,000 during 2023 compared to an unrealized loss on marketable equity securities of $94,000 during 2022.

The net gain on marketable equity securities during 2023 was primarily related to a $196,000 unrealized gain related to an increase in the value of our holdings of Kinross common stock and an increase of $33,000 in the value of our holdings of Highlander Silver common stock, which was partially offset by an unrealized loss related to the decrease of $111,000 in the value of our holdings of Vendetta stock and a decrease in the value of our holdings of Vox common stock of $35,000 during 2023.

The loss during 2022 was primarily related to an unrealized loss on marketable equity securities of $172,000 due to a decrease in the value of our holdings of shares of Kinross common stock and an unrealized loss on marketable equity securities of $59,000 on our holdings of Vox common stock, partially offset by an unrealized gain on marketable equity securities of $137,000 in the value of our holdings of Vendetta common stock.

Changes in the unrealized value of our holdings of marketable equity securities are related to the changes in the fair values of those holdings which are dependent on the market prices of the individual securities.

During 2022 we sold 1,250,000 shares of Vendetta common stock for proceeds of $63,000 and recorded a realized loss on the sales of $201,000.

During 2021 we sold (i) 2,550,000 shares of Vendetta common stock for proceeds of $112,000 and recorded a realized loss on the sales of $269,000;

(ii) 430,000 shares of TNR common stock for proceeds of $27,000 and recorded a gain on the sale of $19,000 and (iii) 3,200 shares of Vox for proceeds of $8,000 and recorded a gain on the sale of $2,000.

We had no sales of marketable equity securities during 2023.

See Note 3, “Marketable Equity Securities” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional discussion of our marketable equity securities.

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See “Liquidity and Capital Resources” below.

We recorded a loss on derivative instruments of $4,000 during 2022 compared to a loss on derivative instruments of $38,000 during 2021.

We recorded a gain on derivative instruments of $31,000 during 2023 compared to a loss on derivative instruments of $4,000 during 2022.

During 2023, we sold certain Kinross calls against our holdings of Kinross common stock for proceeds of $31,000.

The calls expired unexercised during 2023 and we recorded a gain of $31,000 during 2023 related to those calls.

During 2022, our warrants to acquire Vendetta common stock (“Vendetta Warrants”) expired unexercised, which resulted in the $4,000 loss on derivative instruments.

The loss during 2021 was primarily related to a $46,000 loss on our Vendetta Warrants offset by a gain on certain Kinross calls we sold for $8,000, which expired unexercised.

See Note 7, “Derivative Instruments” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional discussion of our derivative instruments.

We anticipate we may write calls against our holdings of Kinross common stock in 2023 to provide additional income on a limited portion of shares of Kinross that Solitario may sell in the near term, which is generally defined as less than one year.

We anticipate we may write calls against our holdings of Kinross common stock in 2024 to provide additional income on a limited portion of shares of Kinross that we may sell in the near term, which is generally defined as less than one year.

We recorded $25,000 of depreciation and amortization during 2023 compared to $29,000 of depreciation and amortization during 2022.

We added approximately $50,000 of equipment for use at our Golden Crest project which accounted for the majority of the increase in our depreciation between 2022 and 2021.

The reduction in depreciation and amortization is primarily related to certain assets becoming fully depreciated during 2023 and 2022.

We amortize our equipment over a five-year period.

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We recorded interest income of $191,000 during 2023 compared to interest income of $131,000 during 2022.

The increase during 2022 was primarily related to an increase in the outstanding balances of our investments in United States Treasury securities during the majority of the year as a result of the $2,036,000 received from sales of our common stock under our ATM Program effected in the first quarter of 2022.

In addition, during 2022we recorded an unrealized loss of $108,000related to the value of our mark-to-market short term investments in United States Treasury securities compared to an unrealized loss of $102,000 during 2021 as a result of changing interest rates.

We anticipate our interest income will decrease in 2023 compared to 2022 as a result of the use of our short-term investments and our cash balances for ordinary overhead, operational costs, and the exploration, evaluation and or acquisition of mineral properties discussed above.

The increase during 2023 was primarily related to an increase in the outstanding balances of our investments in our money market account and United States Treasury securities during the majority of the year as a result of the net proceeds of $7,352,000 received from private placement sales of our common stock during 2023.

In addition, interest rates on short-term investments increased during 2023 compared to 2022.

During 2023, we recorded an unrealized gain of $56,000 related to the value of our mark-to-market short term investments in United States Treasury securities compared to an unrealized loss of $108,000 during 2022 as a result of changing interest rates.

We anticipate our unrealized gains and losses related to our mark-to-market short-term investments will decrease in 2024 compared to 2023 as a result of the use of money market funds rather than short-dated USTS during 2024, as well as a reduction in the balances of our short-term investments and our cash balances for ordinary overhead, operational costs, and the exploration, evaluation and or acquisition of mineral properties discussed above.

See “Liquidity and Capital Resources,” below, for further discussion of our cash and cash equivalent balances.

Our other income of $20,000 during 2022 was from the sale of certain exploration data on a non-owned mineral property upon which Solitario had previously done exploration activities.

Our other income of $10,000 during 2021 related to the forgiveness of $10,000 remaining balance on our Paycheck Protection Program loan (the “PPP Loan”) that originated in 2019 with an original balance of $70,000.

Our other income of $20,000 during 2022 was from the sale of certain exploration data on a non-owned mineral property upon which Solitario had previously done exploration activities, with no similar item in 2023.

We do not anticipate other income will be a significant source of cash in 2024, if at all.

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All long-lived assets are reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable utilizing guidelines based upon future net cash flows from the asset as well as our estimates of the geologic potential of early-stage mineral property and its related value for future sale, joint venture or development by us or others.

During 2022 we recorded no mineral property impairments.

During 2021 we recorded $17,000 of mineral property impairment related to our decision to abandon our Gold Coin project in Arizona.

During 2023 and 2022 we recorded no mineral property impairments.

Liquidity and Capital Resources

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Short-term Investments

As of December 31, 2022, we have USTS with maturities of 15 days to one year, recorded at their fair value of $3,951,000.

Solitario has also held CD’s during 2021 and 2022 which matured during 2022 and Solitario has no outstanding CD’s at December 31, 2022.

The USTS and CD’s are recorded at their fair value based upon quoted market prices.

Our short-term investments in USTS and CD’s are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset.

As of December 31, 2023, we have money market investments and USTS with maturities of 1 day to two months.

At December 31, 2023 we had $7,738,000 in our money market account held in a brokerage account and USTS recorded at their fair value of $698,000.

Solitario also held CDs during 2022 which matured during 2022.

Solitario has no outstanding CDs at December 31, 2023.

The USTS are recorded at their fair value based upon quoted market prices.

Our short-term investments in the money market account and USTS are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset.

We anticipate we will roll over that portion of our short-term investments not used for operating costs or mineral property acquisitions as they mature during 2024.

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We owned 100,000 shares of Kinross common stock as of December 31, 2023, which are recorded at their fair value of $605,000.

As of December 31, 2022, we own 7,750,000 shares of Vendetta common stock recorded at their fair market value of $229,000 and we own 134,055 shares of Vox common stock recorded at their fair market value of $311,000.

As of December 31, 2023, we own 7,750,000 shares of Vendetta common stock recorded at their fair market value of $118,000, we own 134,055 shares of Vox common stock recorded at their fair market value of $276,000, and we own 100,000 shares of Highlander Silver Corp common stock recorded at their fair market value of $33,000.

Changes in the fair value of marketable equity securities are recorded as gains and losses in the statements of operations.

Solitario also holds 200,000 shares of Highlander Silver Corp.

stock at December 31, 2022, which has a restrictive legend and has been recorded with a zero fair value until the restrictive legend is removed.

Working Capital

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Stock-Based Compensation Plans

As of December 31, 2022, options to acquire 5,390,000 shares of our common stock were outstanding.

There are 3,227,500 options that are vested and exercisable at December 31, 2022.

As of December 31, 2023, options to acquire an aggregate of 3,828,500 shares of our common stock were outstanding.

Of that amount there are 2,576,000 options that are vested and exercisable at December 31, 2023.

As of December 31, 2023, our outstanding options include 1,278,000 options that are in the money with a weighted average exercise price of $0.34 per share, which is below the market price of a share of Solitario common stock at December 31, 2023 of $0.56 per share as quoted on the NYSE American exchange.

See Note 10, “Employee Stock Compensation Plans” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a discussion of the activity in our 2013 Plan during 2022 and 2021.

We anticipate that a portion of stock options for 1,561,500 shares of our common stock, which expire in October 2023 with an exercise price of $0.31 per share may be exercised during 2023 if our stock price as quoted on the NYSE American exchange exceeds the exercise price prior to the expiration date.

December 2021 Equity Offering

On December 6, 2021 we completed the sale of 3,100,000 shares of common stock (the “Shares”), at a price of $0.50 per share (the “Offering”) for net proceeds after expenses of $1,542,000.

We did not engage an underwriter or placement agent for the Offering, and therefore there were no underwriter discounts or commissions or placement agent fees.

During 2023, options for 1,486,500 shares were exercised for cash proceeds of $459,000.

We do not anticipate that a significant portion of our outstanding stock options will be exercised during 2024.

Equity offering private placements

On July 31, 2023, we entered into a Stock Purchase Agreement (the “SPA”) with Newmont Overseas Exploration Ltd.

(“Newmont”), for the purchase and sale of 4,166,667 shares of Solitario common stock (the “Newmont Shares”), at a price of $0.60 per share for net proceeds of $2,422,000 after certain legal and regulatory offering costs of $78,000.

In connection with the sale of the Newmont Shares, we entered into an Investor Rights Agreement with Newmont, which granted Newmont certain additional rights, including a preemptive right, certain anti-dilution protections and certain other rights and notice provisions related to our Gold Crest mineral property assets.

On October 13, 2023, we completed a private placement of 8,631,818 shares of our common stock (the “Shares”) at a price of $0.55 per share for net proceeds of $4,727,000 after certain legal and regulatory offering costs of $21,000.

The sale of the Shares was made through a subscription agreement between Solitario and each respective investor.

The Shares were offered and sold pursuant to our existing shelf registration statement on Form S-3 (File No.

We filed a prospectus supplement, dated December 1, 2021, with the SEC in connection with the sale of the Shares in the Offering.

Three of our executive officers participated in the Offering, purchasing 50,000 Shares each, on the same terms as the other investors.

The Offering was unanimously approved by our Board of Directors and the participation by our executive officers was also unanimously approved by the Audit Committee of our Board of Directors.

The Shares were issued pursuant to an exemption from registration under United States and Canadian securities laws.

No officers, directors or other of our affiliates participated in the private placement.

Investors in the private placement were provided certain registration rights with respect to the Shares they purchased.

We did not engage an underwriter or placement agent for the private placement, and therefore there were no underwriter discounts or commissions or placement agent fees.

On November 16, 2023, we entered into a consulting and capital markets advisory contract (the “Consulting Contract”) with an independent advisory firm, in exchange for the issuance of 500,000 shares which were issued on December 6, 2023 at a price of $0.51 per share.

The sale of the shares was made through a subscription agreement between us and the advisory firm.

The shares were issued pursuant to an exemption from registration under United States and Canadian securities laws.

We recorded a pre-paid expense of $255,000 for the issuance of the shares.

The pre-paid expense is being amortized over the one-year term of the Consulting Contract and we recorded $32,000 in general and administrative expense during 2023 related to the Consulting Contract.

At the Market Offering

On February 2, 2021, we entered into an at-the-market offering agreement (the “ATM Agreement”) with H.

Wainwright & Co., LLC (“Wainwright”), under which we may, from time to time, issue and sell shares of our common stock through Wainwright as sales manager in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $9.0 million (the “ATM Program”).

On February 2, 2021, we put an ATM (“At the Market”) program, in place, which was amended in 2023, to allow us to sell shares of our common stock under that program from time to time through H.C Wainwright and Co.

(“Wainwright”) as sales manager in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $10.0 million (the “ATM Program”).

The common stock is distributed at the market prices prevailing at the time of sale.

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The ATM Agreement provides that Wainwright is entitled to compensation for its services at a commission rate of 3.0% of the gross sales price per share of common stock sold.

In March 2022, we sold 2,650,724 shares of our common stock under the ATM Program at a price of $0.79 per share for net proceeds of $2,023,000 after commissions and sale expenses.

During 2021, we recorded $144,000 as a charge to additional paid-in-capital for one-time expenses related to entering into the ATM Agreement.

During 2021, we sold an aggregate of 643,033 shares of our common stock under the ATM Program at an average price of $0.68 per share for net proceeds of $299,000 after commissions, sale expenses, and one-time expenses.

We did not sell any shares under the ATM Program during 2023.

During 2022, we sold 2,650,724 shares of our common stock under the ATM Program at a price of $0.79 per share for net proceeds of $2,023,000 after commissions and sale expenses.

Off-balance sheet arrangements

As of December 31, 2023 and 2022, we have no off-balance sheet arrangements.

Net cash used in operations during the year ended December 31, 2022 increased to $2,900,000 compared to $2,157,000 for the year ended December 31, 2021 primarily as a result of (i) the increase in exploration expense at our Golden Crest project to $1,505,000 during 2022 compared to $420,000 of exploration expense incurred at our Golden Crest project during 2021, and the increase in exploration expense at our Lik project to $668,000 during 2022 compared to $362,000 expense incurred at Lik during 2021;

and (ii) an increase in the use of cash from the net change in accounts payable and other current liabilities to $51,000 during 2022 compared the a net use of cash of $17,000 from the net change in accounts payable and other current liabilities during 2021.

Partially offsetting this increased use of cash in operations was (i) a net source of cash from changes in prepaid expenses and other current assets of $265,000 during 2022 compared to a net use of cash from changes in prepaid expenses and other current assets of $277,000 during 2021;

(ii) a reduction in reconnaissance exploration expense to $94,000 during 2022 compared to reconnaissance exploration of $306,000 during 2021;

and (iii) and increase in interest income to $131,000 during 2022 compared to interest income of $123,000 during 2021.

Net cash used in operations during the year ended December 31, 2023 increased to $3,263,000 compared to $2,900,000 for the year ended December 31, 2022 primarily as a result of (i) the increase in exploration expense at our Golden Crest project to $1,798,000 during 2023 compared to $1,505,000 of exploration expense incurred at our Golden Crest project during 2022;

(ii) an increase in our reconnaissance exploration expenditures to $135,000 during 2023 compared to reconnaissance exploration expenditures of $94,000 during 2022;

(iii) an increase in general and administrative expense to $1,712,000 during 2023 compared to general and administrative expense of $1,360,000 during 2022;

(iv) a decrease in the cash provided from a reduction in prepaid expenses and other current assets to $20,000 during 2023 compared to cash provided from a reduction in prepaid expenses and other current assets of $265,000 during 2022;

and (v) other income of $20,000 during 2022, with no similar item during 2023.

Partially offsetting these additional expenditures and the overall uses of cash in operations during 2023 compared to 2022 were (i) a reduction in the exploration expenditures at our Lik project to $404,000 during 2023 compared to exploration expenditures of $668,000 during 2022;

(ii) an increase in accounts payable and other current liabilities of $328,000 during 2023 compared to an decrease in accounts payable and other current liabilities as a use of cash of $51,000 during 2022;

and (iii) an increase in interest and dividend income to $191,000 during 2023 compared to interest and dividend income of $131,000 during 2022.

These items are discussed in further detail above under “Results of Operations.”

Net cash provided by investing activities increased to $701,000 during 2022 compared to net cash provided of $90,000 during 2021.

The primary reasons for the increase in cash provided by investing activities are (i) an increase in the cash provided from the sale of short-term investments to $1,028,000 during 2022 compared to $609,000 during 2021;

and (ii) a reduction in capitalized initial costs for new Golden Crest claims to $340,000 compared to the capitalization of initial costs on claims and lease acquisition costs at Golden Crest of $695,000 during 2021.

Partially offsetting these net increases in cash provided by investing activities were (i) an increase in acquired exploration related equipment classified as other assets related to the Golden Crest project to $50,000 during 2022 compared to additions to other assets of $39,000 during 2021, and (ii) a decrease in the cash from the sale of marketable equity securities to $63,000 during 2022 compared to cash from the sale of marketable equity securities of $147,000 during 2021.

Net cash used by investing activities was $4,409,000 during 2023 compared to net cash provided by investing activities of $701,000 during 2022.

The primary reasons for the increase in cash used by investing activities are (i) an increase in the cash used to purchase short-term investments of $4,429,000 during 2023 compared to the provision of cash from the sale of short-term investments of $1,028,000 during 2022;

and (ii) cash from the sale of marketable equity securities of $63,000 during 2022 compared with no sales of marketable equity securities during 2023.

Partially offsetting these items were (i) no additions to mineral properties for initial acquisition costs during 2023 compared to the use of cash of $340,000 capitalized as mineral properties for initial acquisition costs during 2022;

(ii) the sale of calls on the shares of Kinross common stock we own for cash proceeds of $31,000 with no similar sales of derivative instruments during 2022;

and (iii) a reduction in cash used for additions to other assets to $11,000 during 2023 compared to cash used for additions to other assets of $50,000 during 2022.

We anticipate we will continue to utilize proceeds from the sale of our short-term investments and any proceeds we may derive from potential sales of marketable equity securities to fund our operations during 2024.

Our net cash provided by financing activities during 2023 was from (i) the sale of 12,798,485 shares of our common stock from private placements for net cash of $7,097,000 discussed above under “Equity offering private placements,” after certain direct costs related to the amendment of certain terms of the ATM Program of $46,000 and entering into the Consulting Contract of $6,000, discussed above;

and (ii) the exercise of options for 1,486,500 shares of our common stock for net proceeds of $459,000.

Our net cash provided by financing activities during 2022 was from (i) the sale of 2,650,724 shares of our common stock under the ATM Program at a price of $0.79 per share for net proceeds of $2,023,000, and (ii) the exercise of options for 114,250 shares of our common stock for net proceeds of $30,000.

Our net cash provided by financing activities during 2021 was from (i) the sale of 3,100,000 shares in December 2021 of our common stock for net proceeds of $1,542,000;

(ii) the issuance of 643,033 shares of our common stock under the ATM Program for net proceeds of $299,000 and (ii) the exercise of options for 185,000 shares of our common stock for net proceeds of $83,000.

We may utilize the ATM Program during 2023 to supplement our existing cash resources, however we will only use the ATM Program when we believe the market conditions based upon the quoted price of a share of our common stock are appropriate.

We may utilize the ATM Program during 2024 to supplement our existing cash resources, however we will only use the ATM Program when we believe the market conditions based upon the quoted price of a share of our common stock is appropriate.

We do not expect the exercise of options nor the issuance of shares in private placements to be a significant source of cash during 2024.

Development Activities, Exploration Activities, Environmental Compliance and Contractual Obligations

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A historically significant part of our business involves the review of potential property acquisitions and continuing review and analysis of properties in which we have an interest to determine the exploration and development potential of the properties.

In analyzing expected levels of expenditures for work commitments and property payments, our obligations to make such payments fluctuate greatly depending on whether, among other things, we make a decision to sell a property interest, convey a property interest to a joint venture, or allow our interest in a property to lapse by not making the work commitment or payment required.

In acquiring many of our interests in mining claims and leases, we have entered into agreements, which generally may be canceled at our option.

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The following table provides an analysis of our contractual obligations:

(in thousands)

As of December 31, 2023

Payments due by period

(in thousands)

Less than 1 year

More than 5 years

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Solitario acquired its initial interest in the Golden Crest project during 2021.

During 2022 Solitario conducted exploration activities on the Golden Crest project including grid soil and grab rock sampling, hand trenching, mapping, induced polarization ground geophysics, permitting and geotechnical work.

During 2023 and 2022 Solitario conducted exploration activities on the Golden Crest project including grid soil and grab rock sampling, hand trenching, mapping, induced polarization ground geophysics, permitting and geotechnical work.

Over twenty gold-enriched target areas have been identified, with fourteen of these areas containing multi-gram gold per tonne assays.

A Plan of Operations for drilling has been submitted to the USFS and is currently under review.

If permits to drill are received during 2023 field season, Solitario will conduct a 4,000-5,000 meter drilling program.

In addition, we will be continuing a surface exploration program during 2023 consisting of prospecting for new areas of mineralization through the collection of select rock grab samples, systematic soil sampling and geophysics.

In December 2023, the USFS issued a Draft Decision Notice and Finding of No Significant Impact.

Pending the issuance of a final FONSI, and if permits to drill are received during 2024 field season, Solitario is planning to conduct a 5,000-meter drilling program consisting of approximately eight to twelve exploration core holes.

In addition, we will be continuing a surface exploration program during 2024 consisting of prospecting for new areas of mineralization through the collection of select rock grab samples, systematic soil sampling and, potentially, geophysics.

Florida Canyon

The Florida Canyon project is an advanced-stage high-grade zinc project in Peru.

Based on extensive exploration and development work conducted to date, we believe the property has potential to be developed into a mine over the next several years.

Based on extensive exploration and development work conducted to date, we believe the property has potential to be developed into a mine in the future.

The project is held in a joint venture between Nexa (61%) and Solitario (39%).

Solitario and Nexa jointly completed a PEA in 2017 that incorporated a variety of Nexa-generated prefeasibility studies into the analysis.

The PEA evaluation included resource estimation, mining and processing recovery estimates, a preliminary mining and processing plan, infrastructure layout, environmental considerations and an economic analysis based on certain base case parameters.

Solitario and Nexa jointly completed a PEA in 2017 that incorporated resource estimation, mining and processing recovery estimates, a preliminary mining and processing plan, infrastructure layout, environmental considerations and an economic analysis based on certain base case parameters.

The PEA envisioned an underground mining operation with a 2,500 tonne per day floatation mill for processing, resulting in a 12.5-year-mine life.

Concentrates would be trucked to Nexa’s Cajamarquilla zinc smelter facility in Lima, Peru.

The terrain at Florida Canyon is steep and previous project access supporting surface and underground work programs was conducted by helicopter.

The lack of road access restricted the scope of field activities to further advance the project.

During 2022 and 2021 limited work was undertaken on road access to the project, and Nexa expects to continue to work on completing the road access during 2023.

Nexa’s expenditures during 2022 were for the advancement of the access road, community outreach, and a metallurgical testing program.

During 2021, Nexa worked on two separate drilling permits.

The first of these permits (4MEIAsd) was approved and allows additional drilling immediately to the south and east of the current Florida Canyon drilling footprint.

The second permit (5MEIAsd) greatly expands the area in which drilling is permitted to the south and east.

The metallurgical testing program was undertaken to better quantify recoveries of zinc, lead and silver and to more accurately determine the quality of concentrate that the Florida Canyon ores can produce.

The results of the program were encouraging by increasing the estimated recoveries and concentration grades at Florida Canyon.

Nexa has indicated during 2023 they will undertake a 4,000 to 5,000 meter drilling program to focus on the extension of the current resource, Nexa is also continuing to extend road construction to local communities that currently do not have vehicle access as part of their ESG commitment.

The Lik project is an advanced-staged high-grade zinc project.

During 2023, Nexa advanced the project through (i) the completion and upgrade of the road access to the property and local communities;

(ii) completion of a phase 5 permit for additional drilling platforms as well as underground workings;

(iii) signing a two-year exploration agreement with local communities;

and (iv) initial drilling in the Florida Sur area which resulted in two core holes totaling 1,362 meters to test for potential extensions of the San Jorge zone to the south.

Nexa’s planned 2024 expenditures include a comprehensive evaluation of all its geologic data to develop a future drilling program.

Future drilling is expected to test extensions of the Florida Canyon area, but more importantly as many as four new totally un-drill tested prospects to the east and south.

The Lik project is an advanced-staged high-grade zinc project consisting of 47 contiguous Alaska state mining claims.

The project is held in a joint venture between Teck (50%) and Solitario (50%).

During 2022 Teck completed a three-hole, 737-meter (2,415 feet) drilling program in 2022.

Drill hole Lik-231 intersected 3.5 meters (11.5 feet) grading 9% zinc and 3% lead.

In addition to the drilling, Teck also conducted traverse geologic mapping and a ground gravity geophysics survey, which was successful in defining a low-amplitude gravity anomaly that requires further follow-up work.

For 2023, Teck has submitted a drilling permit application to the Alaskan Department of Natural Resources for 70 core holes, including water sources for drilling.

Drill hole location include step-out drilling surrounding the currently defined deposit as well as location along strike to the northeast and theoretical targets more distant to the deposit.

This robust permitting submission allows for significant flexibility for the next five years.

Solitario and Teck are in discussions to jointly fund a 2023 exploration program, with Teck acting as project manager.

The program will include core analysis, mapping and other surface work, project maintenance and, if approved, a limited drilling program to follow-up on the results of the three core holes drilled during 2022.

No specific drill targets have been approved, which is expected to be decided prior to the end of the second quarter of 2023.

During 2023 and 2022 Teck completed a total of four core drill holes.

Solitario and Teck are in final discussions to fund a 2024 work program, with Teck acting as project manager.

Currently, no drilling is anticipated for 2024 at the Lik project.

Other Properties

The current claim holdings of Minera Chambara are 48 concessions totaling 40,583 hectares of valid concessions that surround the Florida Canyon project area held by Minera Bongará.

The project has been on care and maintenance in recent years.

A limited amount of surface exploration has been conducted in recent years.

Significant geochemical anomalies and outcropping mineralization have been identified at several locations on the Chambara property.

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2024 Planned Expenditures

Our 2023 total exploration and development budget is approximately $2,000,000 for our planned exploration expenditures.

Our 2024 total exploration budget is approximately $3,927,000 for our planned exploration expenditures.

This amount does not include any significant expenditures for our Florida Canyon project where our joint venture partner, Nexa, is responsible for 100% of exploration costs.

It includes $1,852,000 planned exploration expense at our Golden Crest project, excluding drilling, pending permitting.

It includes $3,500,000 planned exploration expense at our Golden Crest project, including approximately $2,000,000 for drilling, pending permitting.

We will continue the evaluation of potential new acquisitions of properties primarily in the United States around the Golden Crest project as well as other regions of North and South America.

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Discontinued Projects

We recorded no mineral property impairments during 2022.

During 2021 we recorded $17,000 of mineral property impairment related to our decision to abandon the Gold Coin project in Arizona.

We recorded no mineral property impairments during 2023 or 2022.

Significant Accounting Policies and Critical Accounting Estimates

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What changed 10-K

Item 7. Management’s Discussion and Analysis